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The Price System ( Markets)

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The Price System ( Markets). Economics Unit 4, Lesson 1. Potential Buyers. Potential Sellers. Markets The interaction of buyers and sellers determines the price and quantity of most goods in a market system. - PowerPoint PPT Presentation
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  • The Price System (Markets)2012, TESCCCEconomics Unit 4, Lesson 1

  • Potential BuyersPotential Sellers Markets

    The interaction of buyers and sellers determines the price and quantity of most goods in a market system.2012, TESCCC

  • Buyers and sellers have opposite goals.Buyers want the lowest price.Sellers want the highest price.2012, TESCCC

  • MarketsDraw Supply & Demand Demand Schedule $ QD 10.00 60 20.00 40 30.00 20 Supply Schedule $ QS 10.00 20 20.00 40 30.00 602012, TESCCC

  • MarketD

    S$EP 2040EQQ302060102012, TESCCC

  • With supply and demand both on graph, we now have a market.

    Market equilibrium where quantity demanded and quantity supplied are equal2012, TESCCC

  • Based on 2 AssumptionsEverything in market has a price. Price is best measure to answer the three basic economic questions.2012, TESCCC

  • Prices act as signals.Signals to adjustDemand Supply2012, TESCCC

  • Disequilibrium QS = QD This creates a shortage or a surplus.2012, TESCCC

  • SurplusA price above equilibrium creates a surplus.A surplus is when QS is greater than QD.2012, TESCCC

  • Surplus Excess Supply QS > QDD

    SPEP 2040EQQQDQS302012, TESCCC

  • ShortageA price below equilibrium created a shortage.Shortage is when QD is greater than QS.2012, TESCCC

  • Shortage Excess Demand QD > QSD

    S$EP2040EQQQSQD102012, TESCCC

  • ObjectivesIdentify the determinant that causes a change in equilibrium price.Construct a market, and graph a change in supply and demand with new equilibrium.2012, TESCCC

  • What does it take to make a market?Buyer = demandSeller= Supply Draw a market and label PQS & D EP & EQ2012, TESCCC

  • Product: ToothpasteSD

    $EQEEPQ2012, TESCCC

  • Show what would happen if Crest has a very successful ad campaign. Change in D?or Change in S?2012, TESCCC

  • Product: ToothpasteSD1$QE1EP1EQ12012, TESCCC

  • Product: ToothpasteSD1$QE1E2D2EP2EP1EQ2EQ12012, TESCCC

  • What happened to EP? IncreasedTo EQ?Increased

    So we can generalize and say if D EP EQ 2012, TESCCC

  • Show what would happen if the price of seaweed goes up. Change in D?or Change in S?2012, TESCCC

  • Product: ToothpasteSD1$QE1EP1EQ12012, TESCCC

  • Product: ToothpasteS1D1$QE1EP1EQ1S2E2EP2EQ22012, TESCCC

  • This was caused by a change in the cost of inputs. Seaweed is a major ingredient of toothpaste.2012, TESCCC

  • What happened to EP? Increased

    To EQ?Decreased

    So we can generalize and say if S EP EQ 2012, TESCCC

  • Show what would happen if a new machine can harvest seaweed faster and cheaper. Change in D?or Change in S?2012, TESCCC

  • Product: ToothpasteSD1$QE1EP1EQ12012, TESCCC

  • Product: ToothpasteS1D1$QE1EP1EQ1 EQ2S2EP22012, TESCCC

  • What happened to EP?Decreased

    What happened to EQ?Increased

    So we can generalize and say if S EP EQ 2012, TESCCC

  • Show what would happen if the Surgeon General announced that toothpaste was harmful to your heart.

    Change in Demand or Change in Supply?2012, TESCCC

  • Product: ToothpasteS1D1$QE1 2012, TESCCC

  • Product: ToothpasteSD1$QE1EP2 EQ2D2EP1EQ12012, TESCCC

  • What happened to EP?

    What happened to EQ?

    2012, TESCCC

  • Both decreased.

    We can generalize and say if

    D EP EQ 2012, TESCCC

    Microsoft. (Designer). (2010). Clip art [Web Graphic]. Retrieved from http://office.microsoft.com/en-us/images/

    Microsoft. (Designer). (2010). Clip art [Web Graphic]. Retrieved from http://office.microsoft.com/en-us/images/

    Microsoft. (Designer). (2010). Clip art [Web Graphic]. Retrieved from http://office.microsoft.com/en-us/images/

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